THE PRICE OF A NEW WORLD: AN INTERVIEW WITH PHILIP LINDEN
Originally published from December 18 to 23rd, 2003, here.
Inasmuch as my assignment as "embedded reporter" is to document the emergence of Second Life's in-world community, I try to stay as separate as humanly possible from the day-to-day business decisions of Linden Lab. (As I acknowledged in a recent Salon interview about in-world reporting, my position sort of puts me in the tenuous role of small town newspaper publisher in a company town. What I write is indeed journalism, but it's journalism that will sometimes be influenced by the outlook of the company that underwrites its publication.) But the Lindens' recent decision to alter the subscriber pricing system that will launch on December 22nd is so radical, and so widely discussed-- even outside the Second Life community-- I decided it was important enough to ask some direct questions about what it was, and what it might mean for the world.
And that meant taking some time to talk with Philip Linden, AKA Philip Rosedale, CEO of Linden Lab. I met his spiky-haired avatar by the shore of a Prelude island, where new residents learn the interface, and make the first attempt at creating their own online personas. What follows over the next few days are some excerpts taken from a larger interview recently made available to Newsletter subscribers, with some clarifications for non-resident readers.
Hamlet Linden: In a nutshell, please explain the new pricing structure.
Philip Linden: Well... as with many things SL, it's hard to cram into a smallish nutshell. But I'll try my best.
We are lowering the monthly price to $9.95 from $14.95, and we are adding an ability to have a more limited basic account which has a one-time $9.95 fee with no monthly fee.
Also, there will be additional fees according to the amount of land you own.
And, perhaps most significantly, a program where Linden Lab pays real money to our most successful in-world residents.
HL: And why is Linden Lab doing this?
PL: We are doing this for a bunch of reasons, most of them taken from listening and watching stuff going on in-world. We want Second Life to be as owned by its residents as it possibly can be, and also to evolve as quickly as possible.
We saw a pricing model that didn't fit everyone very well; some people wanting to just get an account and hang around once in a while, check out new stuff, and then on the other hand, people that are becoming the bedrock of SL, wanting to own and do and expand more than is possible with the existing tax economy.
So we tried to create a bunch of different ways to buy [into] Second Life, that fit those models. A simple one-time price for the folks who just want to check in on us once in a while, and ways for really involved users to control more of the world and actually make money.
HL: Give me a concrete example of how this plan will benefit the average resident.
PL: OK. So if you are someone who owns a little land, goes to events, occasionally buys stuff, etc, Second Life will get cheaper for you ($9.95 versus $14.95), and will also get much easier to use.
You won't get a tax bill anymore! (Oh did I mention yet we were killing all the taxes?) So that is a rather important point, maybe I can elaborate a bit.
We are turning off all object and land taxes, as well as 'rez' costs when you bring things out of your inventory. ["Rez" is SL-jargon for instantiating an object into the world. "Taxes" are automatic deductions of in-world "Linden Dollars" from the resident's account, based on how much land and objects they own.]
BUT we are keeping a basic stipend/grant, so folks will still get [Linden] money weekly.
We are going to limit objects by the size of the land parcel they are on. For things like attachments or vehicles, everyone will get a sort of 'traveling budget' that allows them to always have this stuff. So if you leave things on land you don't own, it will work like public objects work today; they will eventually just go back into your inventory. Land parcels will have little meters to show you how full they are with primitives.
So much, much simpler. And frankly, pretty well suggested/explored by many of our residents. Not like something we really had to invent ourselves!
HL: How will this plan affect the day-to-day experience of Second Life for the majority of users?
PL: If one could comically talk of the Second Life "middle class" (which I think is a somewhat different lot than most middle classes), I'd say very little will change. For about the same price, you can probably own about the same amount of land, there will be no tax bills to bother you, and you'll be able to build and play in about the same way as before.
For most folks in Second Life (we have the data), the changes will lower their costs to use SL. So mostly it will be an improvement in the removal of the taxes.
HL: Is the company in trouble, that you're doing something so radical?
PL: [Laughing] No way! We just think the way we are currently charging for Second Life isn't serving the really committed members of the population well at all, and is also putting the brakes on quicker adoption by a broader audience who doesn't yet know what SL is all about.
How many of us have thought, "Man if more people know about Second Life, they'd love it." Well, lower entry level prices will help a lot with that. Deciding to pay $15/month for something you don't yet understand is a tough thing to do. And I think making SL simpler wouldn't be the right way to go. Better to just have plans that can get newbies in the door and get them to see what we have to offer.
So no, we're not in trouble at all. In fact, last couple months have seen our fastest growth since Beta/launch.
Hamlet Linden: Isn't this plan similar to that offered by other online worlds, where you buy in-world money for real money?
Philip Linden: NO! You will not be able to buy Linden Dollars for US Dollars.
BUT, if you are a resident who makes lots of [Linden] money or generates lots of traffic [onto your in-world property], you WILL be able to get real money for your efforts. So this is the reverse of the kind of things we've seen other companies try. We are not allowing forward-conversion, but are instead starting with reverse-conversion. Allowing money to flow to the best content and experienced creators is consistent with SL's vision of a world built by its users.
The alternative of just collecting more money from casual users who then frenetically spend it on a small number of goods... we don't think that makes sense given the nature of Second Life. As the economy grows there will naturally be more consumer spending and third-party trading, etc. But we wanted to start by getting real money and the right pricing plan to our most serious creators.
You know, some people out there think if you spend a hundred hours a week doing something like Second Life, that means you are crazy. I think those people [who say that] are very shortsighted. We want people to be able to dive into SL as much as they like. Making real money is a logical part of that.
HL: If a resident is a heavy builder, will he or she need to make money, to offset significant monthly costs?
Well, that depends. Making and selling stuff won't change.
It will depend on how much land you want to own. If you want a whole sim to play on, and you don't ever let anyone visit or sell anything, that will cost money. ["Sim": For "simulator", a discrete geographic region of the world which exists on a single server.] A whole sim we think will cost $195/month in fees. And this will be a discount over smaller plots... there will be large discounts for bigger and bigger pieces of land.
But the basic allocations should allow lots of building, and sandbox sims and the like will be better because [they'll have] no rez costs.
HL: How will the recent copyright announcement impact this?
PL: Well, it makes the idea of making money more sensible in the light of appropriate intellectual property rights. Imagine you have this growing Second Life business, like making cars or something, and you want to build a racecourse with ten sims or something. You (being a big thinker) go to your [real world] bank and ask for a loan so you can pay for those sims. Only your bank wants to know about collateral. Well, now at least you can demonstrate that you actually do own these cars you are making. I'm not sure if that gets the loan approved, but it's a big step
HL: About how many people will actually make real money?
PL: Long-term, that will be a market question-- I don't know. Short term, we will have a rewards program that will pay probably around the top 5% or so of members, depending on the type of reward.
Hamlet Linden: Give me a concrete example of how this plan will benefit the average hardcore resident.
Philip Linden: [smiling] OK, so let's talk hardcore. Let's say you want to make and sell clothes. So you want a little shop, and it will be full of clothes; people buy them for Linden Dollars, etc. So today [under the current pricing structure], you are strictly limited by the land and object taxes, as to how many prims you can have rezzed.
Under the new system, you will get a basic allocation of land that you don't pay any taxes on, you will have no primitive budget to worry about, and if you sell enough clothes, you will have a couple of ways to turn that money and business into actual $USD, which will then let you pay for more land if you like.
HL: For non-residents, what's a "primitive budget"?
PH: In Version 1.2 [the December 22nd upgrade in which the new pricing goes into effect], the number of objects you can build on your land is a simple function of how much land you own in the simulator-- you can see how many objects you can put down on your land in an 'About box' in the user interface. Things like vehicles and attachments are also counted separately, and you basically won't have to worry about them.
We are also substantially increasing the primitive limits on the various simulators. Under the old scheme, you had to pay weekly taxes for objects. More objects meant more taxes, and that ultimately would limit how much you could build. Unfortunately, the simulators have strict limits which when reached allow no more building, so one person willing to pay more taxes can shut down [other residents] building in the entire simulator. Also, under the old scheme, you are taxed for objects you own anywhere in the world, which is very difficult to manage since you can't easily find them all.
HL: And how would someone selling clothes or whatever be able to transform their operation into a business that earns real money?
PL: If you have a popular store in SL you will be able to make real money in a couple ways. One (which we've already started doing) is by having high traffic to the store - folks who get enough visitors to their land will get paid for it. Additionally, we will be creating mechanisms where you will be able to turn L$ back into $USD or land fees. So if you make a bunch of money selling clothes, you will be able to make your store larger, or alternatively, get paid in cash.
HL: How much money are we talking about?
PL: Rewards will be in the thousands of dollars $USD monthly, for a start. If you look at things like traffic statistics for LindenWorld, this suggests that the top developers could make a sizable piece of that money. [LindenWorld is Second Life's user-made carnival/theme park region.]
HL: Now that there's real money involved, isn't there tremendous potential and incentive for exploiting or griefing the system?
PL: Yes, and we are designing metrics that aren't subject to any obvious griefing. Plus, if people are taking real-world money from each other, our Community Services team will have zero tolerance. So you might be able to cheat a bit once, but that will be your last time in Second Life.
HL: This may be an interesting idea, but isn't it so complex to understand and implement, that it will confuse current residents and end up driving new ones away?
PL: [Smiling] Well we have nowhere to go but up from the current tax system, right?
Seriously, I think the fees will be really easy to understand. There will be a set of 'tiers' of land fees that will cover how much overall land you will be able to own. So $5 gets up to 512 square meters, $195/month gets up to a whole sim, and a bunch of obvious points in between.
So the billing part I think will be pretty simple. There will be a piece in the user interface and on the website that shows you all the land you own. And of course, you never have to worry anymore about objects left around the world!
By the way, we haven't talked about land auctions; perhaps we should.
PL: So this is a cool one: Today when we put land online it is basically a land rush [involving] how fast can you fly and grab a piece. This makes for funny screenshots, but really isn't appropriate in matching land to residents. Same is true with folks releasing land--if you are online you get it; otherwise, tough.
So our very, very fast team whipped up a full blown auction system for these changes. We will sell new land, and also allow users to sell their own land, using an auction system. With new land we will sometimes sell it for Linden Dollars, sometimes for US Dollars.
We think this will make much more sense, and be better for newer users as well as hardcore business owners, etc.
HL: Won't this plan adversely impact Second Life's culture of free-form creativity by making money and commerce too prevalent?
PL: Well, of course that is a deep and very important question. And I think these answers change over time, most correctly, as Second Life changes.
As it stands today, our level of creativity and community is like one thousand times the real world. That's why SL feels so special-- because it is.
It is just what I dreamed it would be. We've built together at a tremendous pace.
Now as creative mediums mature, you at some point have to ask, "What is this all worth?" I mean to real people, not just the creators. And if the answer to that is always "Nothing", then I think it says that whatever that new medium may become, it does not have to power to change the world.
But I believe that Second Life, its people and the things that happen here, DO have the power to change the world.
I think the content and the issues and the people are relevant and important to everyone. And if that is true, you must also believe, even embrace, that the world will increasingly buy and sell and trade these things we are making. So I think that real digital worlds will naturally have real economies and real exchange with real life.
And if that wasn't true, it would mean that they weren't relevant. So I think Second Life is at a fine stage to let a bit of value-setting in the door.
I think we'd all like to know what some of this is worth. I think an awful lot, and that it is important for everyone to know.